Wednesday, March 22, 2017

Calcutta (as the city was then called) descended into an orgy of what has been perceived as communal riots in 1946. The killings were seen as an important factor that made Partition inevitable- it seemed to suggest that Hindus and Muslims would find it difficult to live together in one country.

It was fascinating, therefore, to get a quite different perspective on the killings in a book on the subject reviewed recently in EPW. The author contests the idea that the killings were primarily communal in nature. Rather, he's inclined to give more weight to the famine of 1943 inflicted - that's the right word, as it was entirely avoidable in terms of the supply of and demand for foodgrains- on the city by the British.

The author of the book, the reviewer points out, is of the view that the scorched earth policy pursued by the British following the threatened invasion of Bengal by Japan in World War II was by far the more important factor in fuelling the rights. The British emptied the rural areas of foodgrain stocks to prevent these from falling into Japanese hands. They also destroyed transportation by boats by impounding the boats, again to prevent these from falling into Japanese hands. Both these resulted in an artificial scarcity of foodgrains in the countryside. ( I have read elsewhere that inflated estimates of food output caused the British to export large amounts to support the war in other parts of the world).

Calcutta was treated differently because it was the epicentre of the war effort in the region. Workers had to be fed in order to maintain production for the war, so ration shops were set up to ensure availability of food. The two factors together- scarcity of food in the countryside and relative abundance in Calcutta- caused people to flock to Calcutta putting enormous pressure on those staying in the city for long. It was the battle for territory between those resident in Calcutta for long and the migrants that primarily resulted in riots, the author contends, the riots were not communal in origin.

This
communal single-mindedness that Das speaks of in the Great Calcutta Killings,
Mukherjee shows, is simply not borne out by the historical record. Instead, the
violence was chaotic and driven by a range of factors. First, the fact that
British targets came under attack in the bedlam has fallen through the cracks
in this rush to prise a communal angle from the violence. On Chowringhee, the
Main Street of White Calcutta, several European shops and business were
plundered, as was an Enfield motorcycle showroom on Park Street. The Statesman
House, which housed the main newspaper of White Calcutta, also came under
attack but was saved by prompt police action. In Dharamtolla, a Bata showroom,
a Czech company, was similarly saved from the mob by the police.

Does
widespread looting—of European and Indian targets—fit the mould of the crowds
having a sense of “moral duty”? Again, here the looting has been explained in
terms of Hindus looting Muslim shops and vice versa—a theory little backed up
by data. In the chaos, very little of who attacked whom was actually recorded.
Driven by a concurrent cloth famine, cloth merchants were targeted. And of
course, the authorities were wary of food stocks being ransacked, so the civil
supplies department was heavily guarded. Given this data, Das’ dismissal of the
riot having an economic component falls under heavy strain.

This indeed casts new light not just on the Great Killings but on the Partition that followed. The author also suggests that Bengal PM Suhrawardy has been unfairly maligned. Britian's role in bringing about the Partition of India is far greater than one had thought.

This
communal single-mindedness that Das speaks of in the Great Calcutta
Killings, Mukherjee shows, is simply not borne out by the historical
record. Instead, the violence was chaotic and driven by a range of
factors. First, the fact that British targets came under attack in the
bedlam has fallen through the cracks in this rush to prise a communal
angle from the violence. On Chowringhee, the Main Street of White
Calcutta, several European shops and business were plundered, as was an
Enfield motorcycle showroom on Park Street. The Statesman House, which
housed the main newspaper of White Calcutta, also came under attack but
was saved by prompt police action. In Dharamtolla, a Bata showroom, a
Czech company, was similarly saved from the mob by the police.
Does widespread looting—of European and Indian targets—fit the mould
of the crowds having a sense of “moral duty”? Again, here the looting
has been explained in terms of Hindus looting Muslim shops and vice
versa—a theory little backed up by data. In the chaos, very little of
who attacked whom was actually recorded. Driven by a concurrent cloth
famine, cloth merchants were targeted. And of course, the authorities
were wary of food stocks being ransacked, so the civil supplies
department was heavily guarded. Given this data, Das’ dismissal of the
riot having an economic component falls under heavy strain.
- See
more at:
http://www.epw.in/journal/2017/8/book-reviews/revisiting-our-narratives-great-calcutta-killings.html#sthash.1VAOCo0Y.dpuf

This
communal single-mindedness that Das speaks of in the Great Calcutta
Killings, Mukherjee shows, is simply not borne out by the historical
record. Instead, the violence was chaotic and driven by a range of
factors. First, the fact that British targets came under attack in the
bedlam has fallen through the cracks in this rush to prise a communal
angle from the violence. On Chowringhee, the Main Street of White
Calcutta, several European shops and business were plundered, as was an
Enfield motorcycle showroom on Park Street. The Statesman House, which
housed the main newspaper of White Calcutta, also came under attack but
was saved by prompt police action. In Dharamtolla, a Bata showroom, a
Czech company, was similarly saved from the mob by the police.
Does widespread looting—of European and Indian targets—fit the mould
of the crowds having a sense of “moral duty”? Again, here the looting
has been explained in terms of Hindus looting Muslim shops and vice
versa—a theory little backed up by data. In the chaos, very little of
who attacked whom was actually recorded. Driven by a concurrent cloth
famine, cloth merchants were targeted. And of course, the authorities
were wary of food stocks being ransacked, so the civil supplies
department was heavily guarded. Given this data, Das’ dismissal of the
riot having an economic component falls under heavy strain.
- See
more at:
http://www.epw.in/journal/2017/8/book-reviews/revisiting-our-narratives-great-calcutta-killings.html#sthash.1VAOCo0Y.dpuf

This
communal single-mindedness that Das speaks of in the Great Calcutta
Killings, Mukherjee shows, is simply not borne out by the historical
record. Instead, the violence was chaotic and driven by a range of
factors. First, the fact that British targets came under attack in the
bedlam has fallen through the cracks in this rush to prise a communal
angle from the violence. On Chowringhee, the Main Street of White
Calcutta, several European shops and business were plundered, as was an
Enfield motorcycle showroom on Park Street. The Statesman House, which
housed the main newspaper of White Calcutta, also came under attack but
was saved by prompt police action. In Dharamtolla, a Bata showroom, a
Czech company, was similarly saved from the mob by the police.
Does widespread looting—of European and Indian targets—fit the mould
of the crowds having a sense of “moral duty”? Again, here the looting
has been explained in terms of Hindus looting Muslim shops and vice
versa—a theory little backed up by data. In the chaos, very little of
who attacked whom was actually recorded. Driven by a concurrent cloth
famine, cloth merchants were targeted. And of course, the authorities
were wary of food stocks being ransacked, so the civil supplies
department was heavily guarded. Given this data, Das’ dismissal of the
riot having an economic component falls under heavy strain.
- See
more at:
http://www.epw.in/journal/2017/8/book-reviews/revisiting-our-narratives-great-calcutta-killings.html#sthash.1VAOCo0Y.dpuf

This
communal single-mindedness that Das speaks of in the Great Calcutta
Killings, Mukherjee shows, is simply not borne out by the historical
record. Instead, the violence was chaotic and driven by a range of
factors. First, the fact that British targets came under attack in the
bedlam has fallen through the cracks in this rush to prise a communal
angle from the violence. On Chowringhee, the Main Street of White
Calcutta, several European shops and business were plundered, as was an
Enfield motorcycle showroom on Park Street. The Statesman House, which
housed the main newspaper of White Calcutta, also came under attack but
was saved by prompt police action. In Dharamtolla, a Bata showroom, a
Czech company, was similarly saved from the mob by the police.
Does widespread looting—of European and Indian targets—fit the mould
of the crowds having a sense of “moral duty”? Again, here the looting
has been explained in terms of Hindus looting Muslim shops and vice
versa—a theory little backed up by data. In the chaos, very little of
who attacked whom was actually recorded. Driven by a concurrent cloth
famine, cloth merchants were targeted. And of course, the authorities
were wary of food stocks being ransacked, so the civil supplies
department was heavily guarded. Given this data, Das’ dismissal of the
riot having an economic component falls under heavy strain.
- See
more at:
http://www.epw.in/journal/2017/8/book-reviews/revisiting-our-narratives-great-calcutta-killings.html#sthash.1VAOCo0Y.dpuf

Tuesday, March 21, 2017

About a third of the Indian army - or nearly half a million men- is bogged down in Kashmir. The army sees this as helpful to keeping the forces combat ready. An article in EPW points out, however, that there are significant negatives to the army's deployment in Kashmir.

One, army excesses sully the army's name.

Two, the infantry gains in importance at the expense of other arms- witness the supercession by General Rawat of seniors with a distinguished record in other arms (although this may not be the only reason for the supercession).

Three, the need to contain China, given that a significant chunk of the army is tied up in Kashmir, has necessitated creation of fresh divisions. This, in turn, has led to revenue expenditure eating into capital expenditure and coming in the way of the army being able to implement its Cold Start doctrine- a quick, short war on the Western front- in retaliation for cross-border terrorism practised by Pakistan.

Four, the expansion of the office cadre has been fuelled mainly by recruits from UP, Uttarakhand and Haryana. This has implications for the overall composition of the army. The article also mentions that these are areas in which aggressive nationalism has wide acceptance and those joining the army would not be exempt from these influences. This could have implications for the army' s overall philosophy.

Army deployment in Kashmir, the author argues, has thus had a corrosive act on the army. But the big question which such analysts are not able to address suitably is: can we afford to pull the army out of Kashmir given that we have not been able to make much headway either with the people of Kashmir or with Pakistan?

North Korea was flagged among the foreign policy priorities for President Trump. The advice was well-placed. Tensions in the Korean peninsula have been rising, with North Korea testing long-range missiles and the US responding with a sophisticated air defence system for South Korea.

Among the options being considered is all-out war, aimed at taking out North Korea's nuclear armoury. The argument is that North Korean leader Kim Jong Un is crazy. As an article in the FT points out, he's a rational leader focused on survival. It's the war option that is crazy:

The North Korean nuclear and missile programmes are widely dispersed, including underground and underwater. It is unlikely that the whole programme could be destroyed in a single wave of strikes, which would immediately raise the prospect of nuclear retaliation by the North.
Even if the US was miraculously able to take out the whole nuclear programme in one swoop, the North Koreans still have formidable conventional artillery. They could launch devastating barrages aimed at Seoul, the South Korean capital, a city of 10m people 35 miles from the North Korean border. Japan would also be vulnerable to missile strikes, as would US bases in the region.

... the better route, in the long run, would be to search for a deal that freezes the country’s nuclear programme, in return for economic assistance and a guarantee that the US will not seek to overthrow the regime.

And what if such a 'grand bargain' can't be struck? Well, it would be best for the US to live with a nuclear North Korea, as it has lived with a nuclear Russia. The alternatives are too horrifying to contemplate.

Thursday, March 16, 2017

Well, it doesn't look as though the Indian economy has collapsed after demonetisation. The impact on GDP growth for 2016-17, as estimated by the CSO and the RBI, is less than 50 basis points. We will, of course, know for sure after the Q4 numbers are out.

Demonetisation is one of many glaring instances of pundits having got things wrong. Some of the others are: the potential impact of Raghuram Rajan now staying on as RBI governor, Brexit and Trump's victory.

The article is behind a pay wall, so the full article is reproduced below:

Following the demonetisation move last November, the pundits -- academics,
economists, media commentators and others --
were quick to pronounce judgment: Narendra
Modi had blundered.

The
withdrawal of high-denomination currency
notes, they said, had caused enormous economic hardship.
The prime minister should have known
better. He should have consulted experts before embarking on
such a radical
measure. Mr Modi would pay the price in the state elections
that were to follow.

It’s now
clear that the pundits got it wrong. Demonetisation did not
work against the
BJP in the recent polls and may have even contributed to its
huge victory in
UP.

Some pundits
argue that it was the political narrative of demonetisation
that mattered, not
the economic content. Demonetisation did cause hardship to the
poor. But they
didn’t mind because they could see that the rich would suffer
more.

One can go
along with this view if the hardship
amounted to putting up with long lines in
banks. But not if the hardship meant
a sharp slowdown in economic growth and losses in jobs and
incomes. When people
lose their jobs in an economic slowdown, they don’t go out and
celebrate
because multi-millionaires have lost even more on the stock
exchange!

The truth is
simple enough but the pundits don’t seem to get it.
Demonetisation has not derailed
growth as much as they had predicted. Two agencies respected
for their
independence and professionalism, the Central Statistics
Office (CSO) and the Reserve
Bank of India (RBI), have estimated the impact of
demonetisation on the gross
domestic product (GDP) growth for 2016-17.

Using the
Gross Value Added (GVA) approach, the RBI estimates the impact
on the GDP
growth at 33 basis points in its monetary policy statement of
February 8. Again,
going by GVA, the CSO estimates the impact at 30 basis points
in its second
advance estimates released on February 28.

Economists
may have difficulty in accepting these numbers but bankers
seem to think they
reflect the ground reality. Bankers did not see any
significant increase in
stress in their loan book in respect of large corporates and
small and medium
enterprises. They say that some stress was evident only in
respect of
micro-enterprises. Repayments of agricultural and
micro-finance loans were
surprisingly resilient.

Many of
those who had warned that the third
quarter (Q3) numbers for 2016-17 would show up the
impact of demonetisation
have since changed their tune. Wait for the Q4 numbers, they
say. We’ll know soon. In the meantime, we have the recent
election results to go by. Voters don’t seem to have found the
short-term costs
of demonetisation very steep. And they believe the PM when he
says it will
deliver long-term gains.

This is not the
only glaring instance in recent times of the pundits having
got things badly
wrong. In June 2016, when Raghuram Rajan announced that he
would not seek a
second term as RBI governor, the
Modi government drew a barrage of negative comment. The
pundits warned that India’s image abroad would be badly
dented, foreign
investors would flee, the combination of Brexit and Rexit
could cause a
currency crisis, the RBI’s autonomy was in peril… some of us
may have been
pardoned for supposing that the end of the world was in sight.
None of these
dire outcomes hasmaterialised.

Our pundits
are in good company. Following the British vote on Brexit,
many foreign
commentators predicted a sharp slowdown for the British
economy and enormous
uncertainty for the world economy. Among the doomsayers was
Mark Carney, the governor
of the Bank of England (BoE).

Ahead of the
vote on Brexit, the BoE issued warnings about the potential
effects of a vote
for Brexit. After the vote, it moved to cut interest rates and
boost stimulus
measures to contain the adverse impact. Mr Carney has since
revised his
forecast for 2017 upwards. The world economy is also doing
better than was
forecast in 2016. Nobody talks about the impact of Brexit any
more.

Then, we
have the Donald Trump phenomenon. The liberal media in the US
did its damndest
to stop Mr Trump in his tracks in
the run-up to elections. They forecast ruin for the US economy
and the world at
large given his hostility to some aspects of globalisation.
Paul Krugman famously wrote that the stock market
would “never” recover from a Trump victory. The Dow Jones
Index went on to
touch an all-time high after Mr Trump
won.

In all these
cases, the pundits got it wrong because many
were hopelessly prejudiced. They
did not like Mr Modi, so they were
quick to fault demonetisation and the exit of Mr Rajan.
They did not want to see the European Union unravelling,
so they viewed Brexit as a disaster for the UK. They hated Mr
Trump as an individual (and favoured Hillary Clinton),
so they predicted a setback to the US economy. By
forsaking objectivity in assessing policy outcomes, the
pundits have ended up
undermining their own credibility and standing.

Saturday, March 04, 2017

High corporate debt and a high level of bad loans at banks are stifling private investment and growth. How did the twin balance sheet problem come about, how has its impact been relatively muted compared to that in other countries and how do we get out of it? The latest Economic Survey has a chapter on it. My analysis and comments in EPW.